Real return calculator

What is a real return?

The return after inflation — how much your purchasing power grows. The Fisher equation gives it exactly: (1 + nominal) ÷ (1 + inflation) − 1.

Example: 7% return with 3% inflation?

1.07 ÷ 1.03 − 1 = 3.883% real. The quick estimate, 7% − 3% = 4%, is close but slightly high.

Why does the quick estimate overstate it?

Inflation also erodes the gains themselves, not only the original amount. The gap grows when rates are high: a 20% return with 15% inflation is 4.35% in real terms, not 5%.

Can a real return be negative?

Yes — when inflation is higher than the return, as with cash earning 2% while prices rise 3%. The real return in that case is -0.97%: the balance grows in dollars but buys less.

Where can I find inflation?

The inflation calculator uses the official CPI to show how prices have changed between years.

Which inflation rate should I enter?

For a past period, use the actual change in the Consumer Price Index; the BLS says the CPI measures the average change in prices paid by urban consumers for a basket of goods and services. For the future, you must assume a rate, and the result is only as good as that guess. The CPI reflects an average household, so yours may differ.

How do TIPS relate to a real return?

Treasury Inflation-Protected Securities adjust their principal with the CPI, pay interest on the adjusted principal, and at maturity pay the higher of the adjusted principal or the original principal, according to TreasuryDirect. Their interest rate is therefore a return above inflation, the same idea as a real return.

How the real return is calculated

A nominal return grows your dollars; inflation shrinks what each dollar buys. After a year, $1 has become 1 + nominal dollars, and prices have risen by 1 + inflation, so purchasing power has changed by (1 + nominal) ÷ (1 + inflation). Subtracting 1 gives the real return. Subtracting the two rates directly, nominal − inflation, is only an approximation that works at low rates. For longer periods, the table compounds the nominal and the real return separately.

Worked example: $10,000 at 7% with 3% inflation for 10 years

The real return is 1.07 ÷ 1.03 − 1 = 3.883%. In nominal terms, $10,000 grows to $19,672. Prices rise by a factor of 1.03¹⁰ = 1.3439 over the same decade, so that amount buys what $14,637 buys today, which is also $10,000 × (1 + 3.883%)¹⁰. The nominal gain was $9,672; in today’s dollars it is $4,637, about 48% of the headline figure.

Common mistakes

Subtracting inflation from the nominal return is accurate at low rates and misleading at high ones, as the 20% and 15% example shows. Using one year’s inflation for a 20-year plan is another, because inflation varies from year to year; run the calculation with a few different rates to see the range. Comparing a nominal return on one asset with a real return on another is a third mistake, so put both on the same basis. And a real return is before tax and fees: neither is deducted here, and the headline return you start from may already include or exclude them.

Sources: the Fisher equation, (1 + nominal rate) ÷ (1 + inflation rate) − 1, is the standard definition of a real rate; U.S. Bureau of Labor Statistics, Consumer Price Index questions and answers (modified September 25, 2025) on what the CPI measures and its limits for an individual household; TreasuryDirect, Treasury Inflation-Protected Securities (TIPS), whose principal is adjusted for inflation. Look up inflation between two years in the inflation calculator, grow a balance in the compound interest calculator or compare yields in the APY calculator.

Estimates for planning only — not financial or tax advice. Your lender, plan or tax professional decides. How we check our calculators.